Tax season is here, a time period that often brings months of stress with the preparation and filing of documents. Business owners are likely to have double the hassle, having the extra responsibility of filing their business’ taxes forms in addition to their individual ones. The best way to avoid this is to continually organize your financial records throughout the entire year, saving you from scrambling to find documents before your deadline. But if you’re just starting to prepare now, you’re not alone. Read below to find the best tips for having the most efficient and least eventful tax season.
Key takeaways
If you haven’t already, now is the time to start noting deadlines, gathering documents and preparing to file your taxes. As a business owner, this will save you from added stress and unnecessary penalties.
Key deadlines:
-Sole proprietors and single-member LLCs: April 15
- Partnerships and multi-member LLCs: March 15
- C Corporations and individuals: April 15
- S Corporations and partnerships: March 15
By preparing early, you lower your risk of making mistakes, losing documents or missing the deadline. Though you can request an extension from the IRS, this will only apply to filing, meaning your payments will still be due by the original date. Failure to comply means you’ll gather fines and interest on these payments.
Gathering your tax documents
Essential tax documents for businesses:
- Last year’s tax return
- Income records
- Purchase records
- Expense records
- Assets
- Employment taxes
While gathering your financial records and receipts, it’s recommended to compare them with your bank and credit card records to make sure everything is accounted for. Unrecorded transactions, duplicate entries or missing receipts can all slow down the tax-filing process.
It’s incredibly important to keep track of your business’ tax documents throughout the year. This means keeping detailed records of each income, expense, invoice, receipt and bank statement and filing them in a safe place. This way, when tax season comes around, you’ll know where all your documents are and be able to file them without a struggle.
Tailoring your taxes to your business
You should be aware that the tax forms differ depending on the type of business you own. See below to find the form that’s right for your business:
- Sole proprietors and single-member LLCs: Schedule C, E, F
- Partnerships and multi-member LLCs: Form 1065
- C Corporations: Form 1120
- S Corporations: Form 1120-S
Your tax deductions will also vary depending on your business structure. Sole proprietors operate their business alone, so they would report their business’ income and losses on their own personal tax return. LLCs with only one member are typically treated the same. For partnerships and LLCs with multiple members, each owner would report their share of the business’ income and losses on their personal tax return. C Corporations are subject to double taxation, as they’re required to file taxes at the entity level with shareholders paying taxes on the dividends. S Corporations are similar to C Corporations but are not subject to double taxation. They require shareholders to report their share of the business’ income on their individual returns through Schedule K-1. Both C and S Corporations may also be subject to filing state and local taxes.
If this all sounds too overwhelming, remember that you don’t have to do it alone. Accountants and tax professionals are available to help guide you through each step of the process, whether it be organizing your documents or filling out the forms. They should do so throughout the entire year, not just during tax season.
Creating a tax preparation checklist
Tax checklist:
- Meet with a professional throughout the year
- Keep your bookkeeping updated
- Gather your documents early
- Know when your taxes are due
- Know which tax deductions and credits you qualify for
- File your taxes on time
- File an extension if necessary
Tax season gets easier every year as technology improves. Services like TurboTax offer step-by-step guidance as you fill out your tax forms. TurboTax can also put you in touch with professionals that can either give you advice and review your return before you file, or can handle the entire process themselves.